Bridging the care funding shortfall

Wednesday, 19th August 2009 12:22 - by Resident IFA

The statistics tell us that people are living for longer. So, quite a few of these will need varying degrees of care, whether it be full-time nursing or simply to reside in a care home. I am in the process of advising on a case whereby an elderly gentleman is resident in a care home, in good physical health, yet suffering diminished mental capacity. To this end, his local authority has a Court Order and is looking after his financial affairs (in lieu of finding his long-since-disowned Son). He has a shortfall in terms of his monthly income streams being able to fund his care costs, yet has decent bank balances that can be used to address the shortfall. It struck me that, ‘standard’ Investments aside, either a Purchased Life Annuity or Immediate Care Needs Annuity had the potential to be an appropriate recommendation. As the Immediate Care Needs Annuity has a natural health enhancement, due to the person being in or in need of care, the amount needed to purchase an income to rectify the shortfall is less. From basic quotes I obtained, it seemed that for half the cost of a Purchased Life Annuity, the Immediate Care Needs Annuity might do the trick and bridge the income gap. This should not be construed as advice, merely my initial thoughts ‘writ loud’. All cases are different and need a bespoke approach to the financial advice needed. Now, I will hold my hands up straight away and say that I do not possess the relevant qualification to submit an Immediate Care Needs Annuity application, but have made the local authority aware that I am happy to put myself to the trouble of obtaining it promptly. I am sure that I have a good deal of the knowledge required and can sit the exam as early as September 11th. The exam is known as ‘CF8: Long-term care insurance’ and is offered by the Chartered Insurance Institute (CII). I can make a Client aware of the product features and provide comparative illustrations, but not advise them and arrange the product. I believe there are not that many Advisers who have taken this exam, so it may well offer a competitive advantage of sorts. I had better start swotting! By-the-by, the thing that surprised me about the Immediate Care Needs Annuity market was the huge number of providers operating in it...a whopping 2! I wonder why this is? Perhaps the actuarial ‘gamble’ is too much for most companies, with the aforementioned Client needing to die (from the Insurer’s perspective) within 6 years for it to be a profitable transaction. If you have relatives in a care or nursing scenario, please be careful to ensure you get the best and most unbiased financial advice you can. Seek out an Independent Financial Adviser with good knowledge and experience of care needs funding...definitely holding the CF8 qualification! Until next time...